Have a chuckle – without coal we are third world!

We had a chuckle when we were told carbon is killing jobs. If it were not for the coal industry we would be a third world country was said. Then chided in a fellow that looked Greek but claimed he is Irish; I was born and bred in the Albury district, and when I was a boy we were told the Myrtleford area in Victoria would die without the Tobacco industry. Tobacco farms were everywhere it was the lifeblood of the community. Well, Myrtleford has survived and it one of the true natural beautiful places in the world and extremely well sought after and prosperous – and no Tobacco – all gone. Mark my words, we can live without coal too – Australia I mean!

All this kicked off over the words ‘natural resource’ and even if it was harmful it was a natural product and this should be sufficient when combined with the economic benefits of the use of. Therefore it was reasonable to consider the claims to the extent that the economy would suffer without Coal Mines. It was concluded that problems would exist, but it was overblown in the effect. The overblown claims had one purpose – to appeal to public perceptions and gaunter support for its importance – and the industry’s survival. The difficulty for the industry is they want us to completely ignore market realities. For instance the falling off of demand, price, and global imposts on carbon pricing. So much influence has those factors got that a local view has no relevance anyway!

So we must say, for local views to be true they would need to defy what is the evidence for existing National and Global infrastructure and markets. Take for instance this story:

Coal not bedrock of Hunter Valley economy, jobs, By Sophie Vorrath on 13 June 2014: “ A new study has found a huge gap between public perception of the coal industry’s importance to the NSW economy and jobs, and the reality of its contribution to the state’s coffers and its people.

The report, Seeing through the dust: Coal in the Hunter Valley economy, launched by the Australia Institute on Friday, finds that Hunter Valley residents believe the local coal industry employs four times more people than it does, and that coal royalties contribute 10 times more income to the NSW Budget than is the case.

It’s a discrepancy, says the report’s author, Roderick Campbell, that illustrates how successful the industry has been in inflating its importance.”

The story goes on to say:

“The coal industry’s public statements invariably emphasise its apparent economic importance. But when the industry is placed in context we see that coal is not the bedrock of the Hunter economy,” and

“The reality is that 95 per cent of Hunter workers do not work in the coal industry and only 2 per cent of NSW government revenue comes from coal royalties.”

As Co2Land org has already mentioned. It is an issue Australia wide. Actually, it may be better described as a global issue of national importance. When you look strategically, it is seen as a war! The tools used are the spread of ‘misconception’, or distortion of truth.

In the article above and reported elsewhere is that the United States (US) has introduced new Environment Protection Agency (EPA) regulations that outline and describe misconception as a war on American jobs, economic growth, and GDP. The point of these regulations is a focus on CO2 emissions from coal-fired power plants.

In the media US economist and New York Times columnist Paul Krugman recently wrote, “coal mining accounts for only one-sixteenth of 1 percent of overall US employment; shutting down the whole industry would eliminate fewer jobs than America lost in an average week during the Great Recession of 2007-9.” The columnist goes on to say “the so-called war on coal – or on coal workers – this happened a generation ago, waged not by liberal environmentalists but by the coal industry itself,” when it turned to machinery to produce more coal, using far less miners. And coal workers lost”. We need to note here that in Australia our Liberal Party is not liberal, it is better described as Tea Party like. It is confusing, but!

Despite all the grand rhetoric, the bigger issue facing the coal industry is cost, and its cost position as the global shift to low-carbon technologies begins to render the fossil fuel uncompetitive. As an aside all are now called ‘natural fuels’ and it might seem ‘clean’ is gone from the Australian policy.

Back to the Hunter Valley, the Seeing through the dust report is quoted “the a subsidiary of Brazilian mining giant, Vale, sacked 500 workers from the Glennies Creek underground and Camberwell open cut mines near Singleton, blaming poor global coal prices for its decision”.

We can only comment with: The spin is spinning, but in the end it will get down to cost – but we don’t need to pay the earth!

 

Rock and Hardplace – RET and DAP predictions

Let us now predict: Soon after the RET review the fossil fuel generators will celebrate with a short-term price relief. It is a two edged sword, as they will discover the relief may be temporary. Partly because large-scale renewables facilities are likely to continue to experience cost reductions, and the Federal government’s Direct Action Plan may further dampen electricity demand – not a good outlook for coal fired generation known for its baseload dependability to be profitable.

It is scheduled for the Australian government’s Direct Action Plan (DAP) to release its white paper -Emissions Reduction Fund, this month April 2014. Also scheduled for mid-2014, the Government’s Renewable Energy Target (RET) Review expert panel will report to the Prime Minister. We might even guesstimate that the PM will find DAP will be unlikely to be a benefit or too expensive for the resources sector, and simply drop it. It could be easier than you think, why because it is not yet funded!

Apart from funding, the Governments’ own wording suggests the final design of the government’s Direct Action Plan will be critical for coal generators, and their survival, with potential for emissions baselines and penalties to curb potential growth prospects. Add to this that individual states do more and encourage energy efficiency, and other large-scale efforts to improve energy efficiency via the Emissions Reduction Fund will be a terrible place for coal fired generators to be if the predicted demand for electricity continues to decline. This will put significant pressure on profit margins of these generators.

CO2Land org feels the PM is in a rock and hard place, by his own doing. Come July he will have no choice but to continue with the threat to repeal the Carbon Price Mechanism (which he refers to as the Carbon Tax) – Which results in a short term gain for coal fired generation. Even if RET is reduced or halved, the long term trend for coal output is still dependent on the price effectiveness of that form of supply – it might even need a ‘subsidy’ to continue supply.

That said, if energy security is the stated reason for a subsidy, it is likely the penetration of renewable energy will continue because it will continue to be subject to falling prices to its advantage, and those prices are dropping because of efficiencies in the way it can deliver. Let us not forget – business too will be more efficient, and in order to survive will factor in the need to reduce energy demands, or at least be more efficient in the use of energy.

Lastly, if the PM were thinking of killing off the Direct Action Plan (DAP) it would be unwise. It is the only mechanism the government has to show they care, or are earth aware. Even South Africa has come to recognize a price on carbon + Renewable Energy + Energy Efficiency + Land use change = business success. We don’t want to appear dumb do we!